FUTURE MARKET DESIGN FOR RELIABLE ELECTRICITY SYSTEMS (CALIFORNIA, USA & UNITED KINGDOM) 


MATTI RAUTKIVI, MELLE KRUISDIJK.

FUTURE-MARKET-DESIGN

The increasing amount of intermittent renewable generation will cause unprecedented change in the European energy sector. System operation is already calling for flexibility from thermal units to cope with the uncertainty and variability of increasing wind and solar production, and simultaneously low operating costs and subsidies for renewables are causing turbulence in the electricity markets. It is evident that balancing capacity from thermal units is needed in the future, but are markets able to deliver this capacity that meets future requirements?

There is an ongoing debate on the need of capacity mechanisms in Europe to secure sufficient amount of generation capacity in future. However, the challenges of the future also require an increasing amount of flexibility to deal with intermittent generation. Capacity mechanism designs presented so far will not solve this problem. Where the need for flexibility is becoming more and more apparent, the market mechanisms to attract flexibility are still unclear.

This paper will shows recent case studies on the value of flexibility in two large power systems – UK and California –, made by recognised consultants. Based on the findings from the value of flexibility studies, Wärtsilä did a large analysis on the potential market models to reward flexibility in the competitive energy market. This paper introduces a market model to incentivize flexible capacity, while ensuring capacity adequacy in the future power systems.



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